District 210 to Borrow $5M to Rectify Mishandled Bond Funds

An independent accounting firm hired by Lincoln-Way High School District 210 to examine whether bond issues earmarked for building construction, improvements and equipment purchases were accounted for, allocated and properly expended, has concluded there are no missing funds or evidence that money was diverted from legitimate school purposes, though some of the accounting was mishandled.

A report from the firm of Crowe Horwath indicates that $10 million in bond proceeds from 2009, which were directed by the board to be deposited into the Capital Projects fund, was incorrectly deposited into and expended from the Life Safety fund.

Approximately $1.2 million of interest income from the 2006 and 2007 bonds was incorrectly transferred from the Capital Projects fund to the Life Safety fund during the 2010-11 fiscal year.

About $4.6 million of the miscategorized proceeds were incorrectly expended for non-capital purposes through journal entries without board knowledge or approval, according to the report, which the board of education accepted at Thursday's meeting.

Crowe Horwath’s examination also showed that during fiscal year 2008-2009, district administration transferred $8 million in interest earnings from the 2006 bond issue to the Operations and Maintenance fund without seeking the express approval of the board of education.

To address these discrepancies, the board has directed action to amend, correct and transfer monies to properly categorize all funds. This includes the transfer of $4.6 million from the district’s operating funds back to Capital Projects, as well as $366,985.75 from the Education fund back to Capital Projects for monies spent on legitimate but non-capital related expenditures such as classroom, library, athletic and music supplies.

The transfers will be funded with additional tax anticipation warrants to be issued this year, increasing the district’s borrowing by $5 million.

“The board is mindful of and committed to serving as a responsible steward of the district’s educational and financial resources in all matters, including its review and response to Crowe Horwath’s agreed-upon procedures (AUP) report,” stated District 210 Board President Dee Molinare in a news release.

“Since the AUP found no evidence of missing funds from bond proceeds, there is no need for a forensic audit of the bond proceeds. Moving forward, District 210 will continue to concentrate our full focus on addressing the issues and challenges facing our district, while fulfilling our mission to provide opportunities to maximize the academic growth of all Lincoln-Way students in the most cost effective manner.”

AUP results from Crowe Horwath

Board resolution